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CaHeK987 [17]
3 years ago
14

Troll island is a small island nation that recently experienced an autonomous change in aggregate expenditures (ae). ae increase

d by 2 billion, and the marginal propensity to consume on troll island is equal to 0.6. what is the change in troll island\'s real gdp after the increase in ae
Business
2 answers:
viva [34]3 years ago
7 0

Answer:

The change in Troll’s Island real gdp after the increase in ae is 5 billion

Explanation:

In this question, we are asked to calculate the change in Troll’s Island GDP, given that its aggregate expenditure increased by 2 billion and the marginal propensity to consume MPC on Troll Island is 0.6

Firstly, to compute this, we need to calculate the multiplier.

Mathematically,

Multiplier = 1/(1-mpc) or 1/mps

Where mps is marginal propensity to save which is 1-mpc = 1-0.6 = 0.4

Multiplier = 1/0.4 = 2.5

Now, we proceed to calculate the change in GDP

Mathematically, this is equal to multiplier * change in aggregate expenditures = 2.5 * 2 billion = 5 billion

garri49 [273]3 years ago
6 0

Answer:

troll island's real gdp after the increase in ae is 5

Explanation:

MPC = 0.6

MPS= 1- 0.6

Multiplier =  1/1-MPC

=1/1-0.6

(1/1-0.6)*2

=5

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                                       Romney's Marketing Company

                                        Multi-step income statement

                               For the Year ended December 31 20YY

Sales revenues 37,250

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Gross profit                                                          = 37,250

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Utilities expense                                = $320

Insurance expense                            = $780

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Total operating income                                         = $6,160

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Net income                                                             = $3,560

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